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McGilla Golf has decided to sell a new line of golf clubs. The company would like to know the sensitivity of NPV to changes in the price of the new clubs and the quantity of new clubs sold. The clubs will sell for $700 per set and have a variable cost of $300 per set. The company has spent $140,000 for a marketing study that determined the company will sell 52,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 8,500 sets of its high-priced clubs. The high-priced clubs sell at $1,000 and have variable costs of $600. The company will also increase sales of its cheap clubs by 10,000 sets. The cheap clubs sell for $340 and have variable costs of $180 per set. The fixed costs each year will be $9,000,000. The company has also spent $1,010,000 on research and development for the new clubs. The plant and equipment required will cost $28,000,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1,200,000 that will be returned at the end of the project. The tax rate is 35 percent, and the cost of capital is 10 percent. What is the sensitivity of the NPV to each of these variables? (Do not round intermediate calculations and round your final answers to 2 decimal places, e.g., 32.16.)
Calculate each project's payback period, net present value (NPV),and internal rate of return (IRR).b. Which project (or projects) is financially acceptable? Explain your answer.
Your investments increased in value by 12.6 percent last year but your purchasing power increased by only 9.0 percent. What was the approximate inflation rate?
The growth rate for the firm's common stock is 7%. The firm's preferred stock is paying an annual dividend of $5. What is the preferred stock price if the required rate of return is 8%?
Your company is thinking about acquiring another corporation. You have two choices—the cost of each choice is $250,000. You cannot spend more than that, so acquiring both corporations is not an option. The following are your critical data:
Using the Gordon growth model, explain why the 2001 terrorist attacks and the Enron financial scandal caused stock prices to decline
The firm manufactures a global positioning system (GPS) that sells for $2,000, with cost of goods sold (hardware 30% and software 70%) of 55% of sales. What is the new cost of goods sold percent of sales for each of the countries
Genetic Insights Co. purchases an asset for $15,116. This asset qualifies as a seven-year recovery asset under MACRS. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, r..
You're trying to save to buy a new $140,000 Ferrari. You have $39,000 today that can be invested at your bank. The bank pays 3.5 percent annual interest on its accounts. How long will it be before you have enough to buy the car?
Discuss 2 methods that can be used by risk managers to forecast the avarge less associated with particular loss exposure, assuming that the firm has large date base of prior losses.
Debt Management Ratios Calculate the times interest earned ratio for Linda's Hats, Inc. using the following information: sales = $50,000,000, cost of goods sold = $15,000,000, depreciation expense = $2,000,000, addition to retained earnings = $10,000..
What is the yield to maturity on a Treasury STRIPS with 11 years to maturity and a quoted price of 63.695?
First, you need to pick a public company to analyze. You should have already informed me of the company you have picked. Discuss recent economic conditions in the industry, as well as prospects for the future
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